Tips. Top. Create a budget with income/expenses. Use cash, bank debit cards, or checks for your purchases. List some of your recent purchases.

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1 Top 5 Tips 1 3 Create a budget with income/expenses. 2 Find ways to save money. What could you do? 4 5 Use cash, bank debit cards, or checks for your purchases. List some of your recent purchases. Open a bank account. Check out three banks or credit unions in your community. Pay bills on time. What do you owe? 7

2 A budget allows you to: Understand where your money goes. Ensure that you don t spend more than you earn. Find uses for your money that will increase your satisfaction. Balance income and expenses. The av e person rage spends money th times a ree day. To develop a budget, you need to: Calculate your monthly income. Track your daily expenses to find spending habits. Know the bills you must pay. Determine where your money goes each month. Budgets for Living at Home and Living on Your Own Income at Home Income on Your Own Part-time job Allowance/Family contribution Gifts Savings Employment Family contribution Grants or loans Investment income Total Income Expenses Total Income Expenses Daily activities Entertainment/Gifts Fast food Car loan/insurance/gas Clothing Electronics Phone/Cable TV/Internet Charitable/Church donations Housing/Rent Electricity/Water Food and household upkeep Car loan/insurance/gas Clothing Electronics Phone/Cable TV/Internet Charitable/Church donations Payment on education loans Healthcare/Childcare Entertainment/Gifts Total Expenses Total Expenses Balance of income minus expenses $ Money available to save, invest, or apply to debt payments $ Balance of income minus expenses $ Money available to save, invest, or apply to debt payments $ 9

3 Credit Card Bill Sample Credit card bills may show more information than this redesign, which was mandated by consumer protection laws in Laws are subject to change at any time. The Big Oops Even though you ve made a timely payment, with your balance transfer and cash advance, plus your purchases, you ve gone over your credit limit and hit the penalty interest rate which is more than double your current rate of 14.99%. Always make more than the minimum payment or pay your balance in full to avoid interest rates and long-term credit card debt. 13

4 Think in terms of total purchase price, not the amount of monthly payments. Buy a used car if you can t afford a new car. Don t be afraid to negotiate with the salesperson to get a better deal. Shop around before buying. Check out car values online (e.g., Kelley Blue Book [ or for True Cost to Own. Make a down payment of at least 20 percent of the car price. Take out the shortest loan plan you can afford. The longer you make payments, the more you will pay for interest on the car loan. Don t take out a loan for longer than you intend to keep the car. Spend no more than 20 percent of your available income on car payments. Make extra payments on your loan whenever you can. Consider selling your used car yourself. You may come up better than selling it to a car dealer. OOPS! I m Upside Down! Upside-down loans are loans where the amount borrowed is greater than the value of the car purchased. Think: I owe $3,000 in car payments, but I could only get $2,000 for the car if I sell it. Unless a substantial down payment is made, the car loan will be upside down from day one. The average car loses about 25 percent of its value in the first year. Think: Wow! I just pulled out of the car lot, and my car is worth less than I paid for it! 20

5 of College You want to get as much money as you can in grants, scholarships, and work-study so that you can borrow less. Colleges must give information on all student aid available so you will be able to determine the actual costs of attending college. Check out the Net Price Calculator at for facts on any Kentucky college you may be considering. Where does college money typically come from? Grants Awards that generally don t have to be repaid and are usually based on financial need. Pell grants are capped at $5,500 per year. Eligibility is determined from a Free Application for Federal Student Aid (FAFSA) form. Scholarships Awards that generally don t have to be repaid and are usually based on skill, ability, talent, or achievement. On average, scholarships cover 22 percent of public school costs and 34 percent of a two-year public college. Loans to students Money borrowed through federal programs must be repaid with interest. Student loans are debt, not exactly financial aid. An education is a good thing, but student debt is off the charts. Interest rates on college tuition loans are high and fixed. The loans can t be refinanced, meaning they can be a trap that s hard to escape. New! The Kentucky Advantage Education Loan ( or is an option if you need additional money for college. It offers a fixed interest rate based on the repayment plan you choose. 24